The head of one of Britain's largest broking firms has warned that the European Union bonus caps which were being finalised in Brussels will damage London's position as a financial centre.
"Sooner or later there will be a tipping point and people will relocate their businesses outside the European Union if that makes them more competitive," Terry Smith, the chief executive of Tullett Prebon, said. "I've no idea whether they will apply to us yet. But I do know that if they do and we are doing business with firms located in Dubai, Singapore or New York those firms will have a competitive advantage."
Mr Smith, pictured right, has already seen an entire trading desk move from London to Dubai to avoid the 50 per cent top rate of income tax.
He said: "They have gone and I don't think they will ever be coming back."
The Tullett boss described 2012 as "not a particularly vintage year" with pre-tax profits down 16 per cent at £115m on revenues 7 per cent lower at £851m.
Mr Smith said that market conditions were subdued, particularly during the second half of 2012 and even so far this year as equity markets have soared. Tullet's revenues are down some 5 per cent. The company has also been hit by higher legal costs and restructuring charges as it trimmed back staff towards the end of 2011 and early 2012.
In addition it has taken a huge, £123m non-cash writedown on the value of its US business, which was hit by a mass poaching of staff by rival BGC in late 2009.
That business made a profit of just £2.4m last year but Mr Smith does not plan to close it.
He said: "We are a global business and we hope it's worth holding onto. It would be difficult for us to operate in some areas without New York but we do know we are going to have to continue supplying it with cash."